Inox Wind Ltd
NSE:INOXWIND
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Inox Wind Ltd
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Thank you, Tanvi. Good evening, ladies and gentlemen. On behalf of Axis Capital, I am pleased to welcome you all for the Inox Wind Limited Q2 FY '21 Earnings Conference Call. We have with us the management team represented by Mr. Devansh Jain, Executive Director; Mr. Jitendra Mohananey, the Group Financial Controller; Mr. Narayan Lodha, Chief Financial Officer, from the company. So we will begin with the opening remarks from Mr. Devansh Jain for the operational highlights and key updates of the sector. Post which, Mr. Jitendra Mohananey will highlight the key financial performance of the company. This will be followed by the Q&A session. So with that, I hand over the floor to Devansh. Over to you, sir.
Thank you. Good evening, everybody. I hope -- to begin with, I hope all of you are safe. The COVID menace seems to be increasingly -- increasing world over. Maybe it's the second week. But I hope all of you are safe and your families are safe. I'll begin with a little overview about the operations and how we see the sector moving forward and where we are at this point in time. And then hand over to Mr. Mohananey, who will take you through some of the balance sheet actions we've taken over this quarter, the financial highlights and the way forward.Over Q1, we progressively ramped up our operations across our plants, stabilized manufacturing operations in spite of the heavy monsoon pan India, where we did not supply too much into the market, given the fact that there would be limited execution on the ground. We have now achieved normalized operations across the plants. And post Q2, all our plants are operating at normalized operations. We've also used the quarter gone by to fully establish our manufacturing setup at a newly set up plant in Gujarat at Bhuj, where now manufacturings are in full swing for nacelles and hubs. Our consolidated order book as on date stands at approximately 1,366 megawatts, which is probably among the -- is the highest or among the highest in the industry. We have a very large visibility now. And I think I'll take you through that as I move forward. Given regulatory matter is behind us, I think we have a very, very clear visibility for the sector bouncing back and high growth in the coming quarters for the wind energy sector. We bagged limited -- a couple of retail orders over this quarter, which was for about 24 megawatts. That helps us consume some of our leftover inventories and also utilize the common infra, which has already been built across some of our feed-in tariff regime sites so that, that increases the cash flow for the company as well as lets us utilize some of our stranded inventory in the system. We're probably down to the last 25-odd megawatt, for which also, I think we're in advanced stages and post that, most of our older inventory would have been completely consumed. We've spent this quarter, and there are significant deals, which are in final stages, some very large deals across IPPs and actually some smaller orders from retail customers, as I mentioned. We hope to be giving some good news in the near future. And I think that gives us much more visibility in terms of executing orders going forward. These orders are across our 2- and 3-megawatt platforms. Over this quarter, we commissioned a miniscule 8 megawatts in Karnataka, which was -- I mean, this is in spite of the peak monsoon, which was for one of our retail customers. We have a lot of projects now under execution, including the large Continuum project. And over the next couple of weeks and months, we would be commissioning this. As you all are well aware, all the future execution for the larger IPP orders at Gujarat, including the Continuum Wind order will be on a plug-and-play basis in our Dayapar site where the 220 kV line, the substation and the bay are already in place for approximately 750 megawatts. We have taken certain key balance sheet actions, and Mr. Mohananey will take you through that. That's primarily to retire high-cost debt and optimize the working capital of the company and enable us to gear up for larger manufacturing and execution as we are moving forward now that the sector's virtually back in shape. I'll spend a little time on the way ahead in FY '21 and the market opportunity. We've spoken about this in the past, but I would reiterate and give some more insight. Post the painful transition, the sector is now looking up and poised for significant growth. Due to COVID, obviously, we've -- the whole industry took a hit for the first 1 to 2 quarters. But I think we're looking at very significant growth coming back in the industry. As you all are well aware, the upper cap for wind turbine auctions have been removed. The tariff discovered in SECI 9 was at about INR 3. And I think this gives a fairly healthy return across IPPs and OEM manufacturers. This coupled with our new 3.3-megawatt platform for the next financial year will ensure extremely sustainable EBITDA margins for us as well as decent high-teen returns for IPPs. I did mention we are now ramping up execution on the ground. We continue to erect turbines -- build foundations, and we would be commissioning larger volumes in the weeks and months to come. We have a smaller commissioning going on, on the ground at this point in time, which we should be done in the next 2, 3, 4 days. I did mention our plants are now running at all normalized operation level to take care of the newer manufacturing, which is taking place. We have multiple deals at final stages. These are things we would be announcing in the weeks and months to come. We have spent a lot of time over the past 1 and 2 quarters to restructure the balance sheet, refinance high costs, optimize working capital as well as reduce costs further. And one of those measures was tying up the facility in Bhuj. We've implemented several such measures across the supply chain. And I think this is something which will bode us well in the coming 2 quarters as well as in the year -- beyond FY '21. For all of you who are tracking the sector closely, I'm sure you all are aware, there is a lot of participation in the renewable energy sector, multiple existing players as well as newer players are announcing larger and larger plans for investments in wind. We've seen large investments being announced by JSW, people like O2, Ayana, Tata, et cetera, are all working towards newer investments in the sector. We've seen the creation of newer renewable energy platforms backed by private equity and pension funds, like KKR, CPPIB and Edelweiss. And all of these have plans to execute thousands of megawatts of renewable energy. I reiterate that we see a significant opportunity to leverage this and being amongst the lowest-cost producers of wind turbines globally, we are ideally positioned to capture a larger volume, and we are working towards it and have already started seeing significant success around that.Our 3.3-megawatt platform is underway. We are well on track to launch it over the course of this financial year, and we would be doing commercial production of this simultaneously in the new financial year. Happy to inform you that we've taken over the land and have started manufacturing the initial prototype tower for this turbine, which should be up in the coming few weeks.With that, I hand over to Mr. Mohananey, who will take you through the financial highlights.
Thank you very much. On the front of financial performance, I'll take you through key balance sheet actions, which we have taken during the quarter and which we plan to take in near future. During the quarter 2 FY '21, the wholly owned subsidiary of company has raised INR 195 crore by issuing nonconvertible debentures at 9.5%. The proceeds of which were utilized inter alia to optimize working capital and retire higher cost debt. The company that is Inox Wind Limited is also in the process of raising long-term [ comps valuation ] NCDs in near future. The amount is INR 199 crore, the proceeds of which too, will be utilized for retiring high-cost debt and optimizing the working capital. On the front of raising equity, IWISL has already received multiple EOIs and pending certain approvals, allotment is expected to take place in near future. On the quarterly performance, I would like to inform you that the impact of COVID-19 lockdown on revenue and margins has now subdued. Revenue and EBITDA compared to preceding quarter: revenue of INR 171 crore in Q2 FY '21 as against INR 97 crores in the preceding quarter, EBITDA loss of INR 33 crores in Q2 FY '21 as compared to EBITDA loss of INR 26 crores in preceding quarter. We had a range bound net debt quarter-on-quarter, amounting to INR 838 crore as compared to INR 645 crore in a preceding quarter. The net debt-to-equity ratio stands at a robust 0.54x. These are the brief financial highlights. And so that the broad view of our operational and financial performance, how we see the sector going forward. We can now commence the Q&A session, and we'll be happy to answer the questions.
[Operator Instructions] First question is from the line of Mohit Kumar from DAM Capital.
So my first question is on the industry, of course, the -- we've heard the SECI-3, SECI-4 and SECI-5 has got extension. So have you received any indication from the clients to -- for the execution? And can -- or can we throw some light on the execution timeline for those orders?
Yes. So multiple bidders under SECI-3 and 4 have received extensions, including ourselves for SECI-3 and 4. In fact, the Continuum order, which we're presently executing is a SECI-4 -- SECI-3?
SECI-3.
SECI-3 -- is a SECI-3 order. So we are seeing increasing traction now that extensions have also come in, and we are in discussions with further winners for further order wins and execution for SECI-3, 4, 5 and so on and so forth.
Can we safely assume that your SECI-3, SECI-4, SECI-5 will get executed or SECI-3, SECI-4 will get executed over the next 24 -- 12 to 18 months?
Sir, I think this should be a fairly rational assumption.
Okay. Sir, my second question is on the balance sheet side. You have mentioned that you're trying to raise equity at the IWISL level, what is the kind of money we are looking at? And what is the usage of the proceed?
So in our last Board meeting, we are taking an enabling resolution to raise NCDs in IWISL and IWL up to 200. Happy to inform you, as Mr. Mohananey also did brief, we've raised INR 195 crores in IWISL, and then we're raising INR 199 crores in IWL. That will primarily be used to optimize the working capital and retire higher cost debt. With this sector coming back, [indiscernible] increasingly getting more confidence with more and more orders coming in, naturally, our cash flows improve going forward, our profitability gets back to historical levels, God willing. With respect to the equity fund, we did take an approval for approximately INR 200-odd crores on the IWISL front as well as IWL front. We are not diluting anything on the IWL front. We don't need to, and we don't require that anymore at these levels. We are diluting a minor stake on the IWISL front. At this point in time, broadly, we are contemplating INR 100-odd crores on the IWISL front.
So what is the usage of the proceeds, equities?
Well, that will be used to either retire debt or pay off creditors as we keep moving forward.
The next question is from the line of the [ Natish Shatir from Ewupiman ] Advisor.
Just a couple of questions here. One, what's the reason for the gross margins being the way they are during this quarter? Number two, on the financials, I mean, if I were to do a simple math in terms of the interest costs and the debt outstanding, we see that when the cost of debt comes to [ some amount which doesn't ] seem to make sense [ paying obviously ]. So what is it that I am missing? I mean why are the ways the cost of debt as high as it seems to be?
So the first question was regarding gross margins where we are?
Right.
I think around that, naturally, I'm not sure what the question is. So the gross margins are what they are, given limited manufacturing in the quarter. So naturally, the fixed costs get a portion over limited manufacturing as the manufacturing gets ramped up in Q3 and Q4. The gross margins will reflect normalized gross margins, what they should be. And actually, if you're going to produce 2 turbines or 5 turbines or 10 turbines in a quarter, you're not going to be able to have a significant profitability. So as volumes increase, actually, the gross margins will reflect the true picture. That's number one. With respect to your question on the financial costs, I think it's a mix of a couple of things. I think we've answered this many times in the quarters. Over the past 3 years, when this sector has been in turmoil and a lot of our peers have holded up, gone bankrupt, shut down, banks completely withdrew from the sector. But actually given the size of the Inox group and our credibility, some of the banks have continued. Over the past periods, a lot of these guys charged us absurd interest rates and also absurd onetime charges, which was one of the reasons. Second is, we've also received advances from various customers who are more than willing to support us by paying advance while the supplies keep happen. So we need to pay interest on that advance to these customers. And third, lot of our LCBD charges are extremely high as opposed to what they used to be when the sector was extremely robust. And now that the sector is getting back on its feet, and our order books are filling up and actual execution, and supplies are happening in the market with no regulatory hurdle and financial closures being achieved by our customers. We are working towards drastically cutting this down. And I think in the next financial year, we should see a drastic improvement in our financial costs.
Okay. Sir, just -- coming back to my -- hopping back to my first question. Pardon my ignorance, but by gross margin, what I meant is, just the cost of your raw materials and changes in management. So the percentage of your revenues, why would volumes impact that?
Sorry?
By gross margin, I just meant your raw materials, raw material consumption and probably personnel cost as a percentage of your revenue. So apart from the personnel cost, raw material should have a direct relationship with the top line, right? So I see that from about 30% last year, pardon my math if it's slightly off, we are up to about 30% in Q2. So that's where the question came from.
Look, I don't have that exact sheet in front of me, but if you're just talking about cost of material and cost of -- versus revenue, they are broadly going to be in the same lines, plus/minus 10% because you may use 1 or 2 consignments, which are higher -- older inventory of higher cost in liquidation or there may be some item, which you've cleared at, airlifted at a higher cost. But broadly, it will all fall in place in terms of revenue and corresponding cost per turbine. Because what is -- because revenue and cost of turbines are more or less the same, yes.
The next question is from the line of Deepak Poddar from Sapphire Capital.
Yes. So, sir, in your opening comment, you have mentioned about the industry now on the cusp of -- poised for growth and even we have an order book that is quite healthy. So when we would see growth kind of start coming back for us, in the second half or in FY '22? So any kind of comment around those line issues?
Well, certainly, we would see growth coming back in FY -- in the second half of this financial year. Q1, as you all are well aware, was a complete shutdown, thanks to COVID. Q2, by the time we started and then peak monsoon comes in, which is historical in India, is always a lean quarter. I think Q3, Q4 is something where you'll start seeing the growth coming back. And actually, FY '22 is going to be a fully normalized operation year for us where we are, God willing, looking at getting back to historical profit margins.
So FY '22 itself, you are kind of looking at historical profit margins?
That's right.
The next question is from the line of Bajrang Bafna from Sunidhi Securities.
Yes, sir, since I'm a little new to the sector, could you explain the advantage of this 3.3 gigawatt turbine, which you just mentioned and how it is competitive, vis-a-vis solar in terms of IRR and everything? That will be really helpful, sir.
Look, as you move to larger turbines and newer technologies, your cost of energy declines. So for example, let's go back 3 or 4 years ago, wind energy used to be supplied, at say, INR 5 on average, where IRRs was say x. Today, wind is being supplied at, say, INR 2.8 -- INR 2.85. So IRRs have not become, say, 0.5x, IRRs have probably become about 0.75x to 0.8x. So the advantage of moving to larger turbines, new technologies is that the cost of energy keeps declining, which makes renewable sources far more competitive. And as is prevailing today globally, renewable is the cheapest source of power vis-a-vis any fossil-fuel-based source of power. Number one. Number two, with your question in terms of comparison with solar, look, it's an IRR game, wind and solar at the end of the day. Both are equally competitive. It's no longer a question of whether solar is more competitive or wind is more competitive. Both are equally competitive with each other. Your question -- sometimes some bids may be at INR 2.5, some bids maybe at INR 3, et cetera, et cetera. But that's a function of supply and demand and what the sites offer in terms of solar radiation or in the PLFs. But primarily, the whole world has now moved to a scenario where it's become a question of renewables versus thermal where renewables has already won the battle. So I think that's where we are. And yes, I hope I've been able to explain it to you.
Yes. No, like solar, I am closely tracking it, and we know that 1 megawatt cost of putting it is around INR 4 crores, which have come down drastically. And the cost of putting 1 megawatt wind is still around INR 5 to INR 5.5 crores. So what sort of PLF that you have been taking to develop your...
That's not a comparison. You don't compare on capital cost. Comparisons on capital costs are completely [indiscernible]. And comparison is always of PLF of IRRs and cost of energy. So effectively, if you have a solar available 1 megawatt, I'd say, INR 4 crores and the PLF is, say, 24%. Similarly, you have a wind turbine available at say, INR 6 crores per megawatt, where the PLF is, say, 38%. So effectively, it's the cost of energy that matters. Not capital cost. Tomorrow, if you [indiscernible]
Yes, I'm asking the PLF only for this 3.3 gigawatt, which is under different wind conditions, is sustainable in this 3.3...
Well, I think PLFs depending on sites which range from, I would say, 30 -- I would say, 36% to 44%. Naturally, some of the sites will be inaccessible, given that larger turbines can't do this. But I think a ballpark figure of about 37%, 38% is fairly realistic.
And what is the cost of this 3.3 gigawatt on a [indiscernible] megawatt basis?
Well, it's always -- you simply go by the thumb rule of roughly INR 6 crores a megawatt. We always follow that thumb rule.
Got it, sir. And sir, could you give some timeline because I think we have received almost INR 800 crore advances from one of our group company, Gujarat Fluoro? And what is the timeline for putting up this plant on the ground for the use by the company?
Well, I think over the next 12 to 15 months, this would be implemented on the ground in a gradual phase. Partly 2 megawatt, partly 3 megawatt. Or earlier, it was 2, then they shifted to 3. So now it's going to be the 3-megawatt execution. So effectively, I think from the new financial year, month-on-month, we are supplying turbines to them.
Okay. So over next 12 to 15 months this entire plant will be...
In the new financial year, 12 to -- in about 15 months' time, we will be completing that project.
Why I've raised this question because in the con call of GFL, they indicated that by June 2021, this plant will be on the ground. So I just wanted to hear the same -- whether this is something which is achievable by the company or not. So just for -- please...
Sure. It's a function of about 40-odd turbines or 35-odd turbines. So it's not a big sum. It's really the 3.3. First, it was 2 megawatt, then it shifted to the 3 megawatt. And now that we are bringing in the 3 megawatt, this should be in the next 12-odd months, as I mentioned, this would be on the grounds with gradual execution month on month.
[Operator Instructions] The next question is from the line of Mohit Kumar from DAM Capital.
I have only one question. Sir, I am -- so this Continuum order is 250 megawatt. Will the entirely 250 megawatt get commissioned by the end of the fiscal second half?
Go ahead, Mohit.
So my question is, will this 250 megawatt get completely commissioned or let the entire revenue get [ in the... ]
Well, Mohit, for strategic reasons, sometimes, it becomes a little difficult to give whose order will be commissioned when. But yes, a significant part of that order will be commissioned in this financial year.
Yes. Understood, sir. Secondly only, sir, are we doing anything on the hybrid? There are so many tenders, so many things are happening on the hybrid side. Have you received any order on the hybrid?
Look, we don't need to do anything in hybrid. So what happens in hybrid is a developer wins a hybrid project. And typically, in a hybrid project, for example, they'll put 75% solar and 25% wind or 75% wind and 25% solar. So the solar guy -- OEM will supply the solar panel, the wind guy will supply the wind turbine. I mean hybrid is just on the same [ scheme ]. They are using wind and solar to balance out grid and make renewable more uniform. Because wind, as you know, works during the night or monsoon period and solar primarily works during the day when there is sun light. So otherwise, from a OEM perspective...[Technical Difficulty]Otherwise, from a manufacturing perspective, it really doesn't impact us or doesn't -- we have no role to play in hybrid or nonhybrid.
And last question on, sir, the 3.3 megawatt, have you started delivering any -- at any of the sites now? Or is it...?
No, no. No, so we are bringing in various components. We've just started the foundation work, and we are starting -- we have started the turbine manufacturing work as we have put on the presentation. So it's over FY '21 that we'll be putting up the entire turbine. And then into the next financial year, we'll be doing commercial production.
Your next question is from the line of Mr. [ Vada ], individual investor.
We were reading some press reports all from DRI raid. Any financial implications about that you will clarify?
Well, again, let me clarify, some of our media friends go overboard. It was not a raid. It was really a DRI team, which came in to understand. As you all are well aware, the article spoke of thousands of crores over the past 3 years. The entire industry has saved about INR 125 crores in CCDC across the entire industry. So the whole amount was the interpretation of 1 or 2 components, which is something, which various manufacturers keep facing time and again. So it was a matter of INR 2, INR 3 crores, INR 4 crores. Nothing else. And that too has been sorted out with those guys.
Okay. That's already been sorted out?
Yes.
Great, sir. And there's a big EPC cost jump in this quarter's result. Any specific, I mean, reason for that?
Well, we commissioned a smaller order of about 8 megawatts, but we've also commissioned certain common infras in various places. As the common infras gets commissioned, we are booking it in terms of...
Okay. So the realization sort of will come in later for that. The gains would come in later for that.
I mentioned, in fact, one of the guys did -- one of the other investors had asked that question about some gross margin revenue. On a normalized basis, the revenues and the gross margins will play out, I mean, to the extent of cost of sales, cost of product.
They will set off each other.
Yes.
Currently, it's sort of not actually in line.
Yes.
Great. And we'll be raising around INR 100 crores in IWISL?
That's right.
Through equity and INR 200 crores already got in through debt?
No. So what we've already done is we've raised INR 195 crores to refinance higher cost debt and working capital in IWISL. We are raising INR 199 crores now in IWL, again, to refinance higher cost debt and optimize working capital. So this is elongated refinancing at lower rates.I think we are -- with the business ramping up, actually, debt will keep reducing as we move forward. But keeping in mind that we are ramping up, and we will ramp up aggressively, we wanted to ensure we refinance these for a longer period of time just to have enough flexibility on the balance sheet side, number one. And what we are doing in IWISL is primarily releasing equity, where we've taken Board approval for up to INR 200 crores but we are raising approximately INR 100 crores at this point in time.
Okay. And no raising in IWL also because we have put on Board approval for that also.
No, at the market cap rate -- at this market cap, it's..
Absolutely. I mean we would feel shortchanged. In my last meeting, I mean, last investor conference also, I said that.
I did mention that we've taken enabling resolutions across the board simply because the sector is poised to grow. We are well prepared. There are lots of orders which we have, significant large orders, which are in the final stages of closure. So now that the sector is finally back after 3 years, we will not compromise our growth and our profit just for some short-term issues and so on and so forth. And hence, we virtually implemented all the approvals which we have to complete.
True. And lastly, anything on the O&M front? Because every presentation has a [indiscernible] written in inverted, which gives us [indiscernible] sort of something happening.
No, I would say, IWISL if you look at it. IWISL is the EPC company as well as a company, which owns the entire O&M business. So as the sector's back and the business keeps doing well, for strategic reasons and various reasons, the most important thing for us over the past 3 years was surviving. The survival piece is behind us. Now naturally, within the survival periods, if you need to do x or y or z, you will do everything so that you can play it out and grow when the sector is back. Unfortunately, in India, it took almost 3 years for the sector to come back and then unfortunately with COVID, it kind of took another 4 or 5 months. So really 3, 3.5 years of our -- of Inox Wind's existence have really been in terms of surviving this period as most of you [indiscernible]
It's been painful for our goals -- as shareholders, it has been painful, but we're hoping that things will be much better.
I think now that the sector is back, regulatory issues are behind us, and we are amongst the most competitive people, if not the most. I think we are -- I did mention, we have enough orders, and I think we're looking at closing significant orders in the coming months. So I think we are well geared to get back to historical levels in the quarters to come.
The next question is from the line of [ Manoj Ivick ] from -- he is an individual investor.
I don't have a question particularly. I just wanted to wish that, finally, after so many quarters, I can feel the optimism, the positivity and the enthusiasm in Devansh's voice today. So I'm happy as an investor that we are looking forward to good days after so many painful quarters just like that much.
Thank you so much. Thank you for your wishes. So for us, the past 3 years have not been easy, but we had no option but to only survive and wait for the good days and now that the good days have come...
I don't have any question I said.
Sure.
The next question is from the line of question of Bajrang Bafna from Sunidhi Securities.
Sir, could you just help on me out in what sort of execution will be giving us some sort of breakeven, both on the operating as well as on net profit level? And are we hopeful of achieving that maybe in next financial year?
So I did mention we are doing multiple things to optimize the working capital and bring down the interest costs, and I can't spell out exact specifics. But certain things, which we've already done, is refinance higher cost debt on the NCDs and IWISL and the proposed NCD in IWL, the equity raise, which we are doing in IWISL. There are certain other actions which are lined up, which will play out in the next few months. With that, we will substantially -- or the right word would be drastically reduce our interest costs into the next financial year. If we -- post that, I mean, ideal -- let me put it like this. If ideally, our interest cost was 0, just based on O&M revenues, our breakeven would probably be 20-odd megawatts. So effectively, it's the interest pile up and the higher cost charges, et cetera, which has played out. And now the sector is back, that's exactly what we are attacking, so that we get back to historical profit levels in the coming financial year.
Okay. Got it. So one more question on this equity investment and these entities that we are raising, who are the, broadly, investors because considering the balance sheet, which is not in a very good shape right now. So if it is something that you can comment on will be really...
In terms of the NCDs, these are some of the largest mutual funds in the country, which are investing. Let's not forget, it's not a question of the balance sheet is not in good shape. In terms of the balance sheet, our leverage is at about 0.5. I think we have a lot of assets on the ground. We have a lot of inventory on the ground. We have a very strong O&M business, which is generating money and is a very long-term annuity play.The question was that the sector was shut for the past 3 years. So let's put it like this. The cinemas business, if they are shut for 6 months, you're not going to have any revenue. That doesn't mean that cinemas will shut down forever. Now that COVID is gone, cinemas are gradually opening up. There will be a ramp-up. Similarly, in the wind industry, it was shut for 3 years. So effectively, how do you -- how do you do anything barring incurring costs? And with the hope of next quarter, next quarter, and unfortunately, it's extremely unsettling to deal with the fact that the government also kept announcing in the next 2, 3 months, regulations will be behind, 2, 3 months, the grid will be ready. Had they told us for the next 3 years, we're going to shut you down, we would have taken consequent steps. But if every quarter, they tell us the next quarter, you're going to be back. You can't take any long-term actions.
Yes, yes. That's really true, sir.
And that's the reason why all our peers have folded up primarily. Because no one can withstand somebody shutting down your entire sector for 3 years. And on top of that, all the inventory you carry, all the orders, which you have, they become bogus because they stop honoring PPAs. Nobody wants to buy your inventory because there are no PPAs. It's an absurd -- it's a perfect cyclone. You can't survive a cyclone like this.
Got it. Sir, what sort of guidance that we could provide in terms of execution maybe next year or maybe in the next 6 months? Just some ballpark numbers will be really helpful, sir.
Well, I think we have a lot of the retail orders under execution, and we have a significant part of the Continuum order under execution. I think we should be executing at least 200 to 250 megawatts in the next 6-odd months.
Okay. And so broadly, a range for the next year, I'm just asking a range. Sir, you can give me a broader range, that will also be helpful.
Yes. I think broadly, next year, we should be comfortably doing 500-odd megawatts. We are being very, very cautious. We are being extremely cautious because after 3 years of these pains, we've got a clear strategy in place to rebuild the cash reserve of the company, get rid of the debt in the company. As I did mention, broadly, our breakeven if it wasn't for the debt would -- net of O&M would virtually be 20, 30 megawatts. So effectively, we are trying to get back to that position, where we'll become so...
The message I was trying to -- yes, I was trying to understand the cash cost level, what is that number? And hopefully with 500 megawatt, I think we'll be breaking even on the cash level, including higher interest cost. So that was the...
It is not the question of breakeven. I think we should be extremely profitable in the next financial year, God willing.
Got it. Got it, sir. And sir, this equity investment of INR 100 crores at the -- who would be the likely target audience for these?
Look, these are smaller investors. These are not -- so primarily, we've looked at larger mutual funds, investors, et cetera, but given that it's an unlisted entity, we're looking at much smaller investors who are primarily coming and investing in this. Also some of our creditors, some of our existing business associates, our customers, they are primarily coming in and investing in this. This is not mutual funds and banks.
The next question is come from the line of [ Chetan Juva ], individual investor.
Just one clarification on the question that one of my colleagues had asked in the beginning. This is about the cost of debt. Where can I -- where can we expect this cost of debt to head towards over the next 2 to 3 quarters?
Sorry, can you be a little louder, please?
Am I audible now?
Better. Just a little louder. Yes.
Okay. So my question was regarding the cost of debt. Over the next 2 to 3 quarters, where can we expect this to head towards, what kind of percentage?
Look, it's going to keep reducing quarter-on-quarter. But as I mentioned, you are going to see a drastic reduction and normalization in the next financial year.
Okay. And at that level, what kind of cost of debt should we expect in the next FY?
Cost of debt in the -- well, I would -- so I think the next 2 quarters, which is really -- we are doing certain fundraising now, refinancing certain things now. So that's really Q3, and then you've got Q4. But I think in the next financial year, we should be with a very optimized balance sheet, with a very optimized cost structure on the financing front as well. There are a few other actions being taken place, which will play out over the next few months. But I can't spell out exact details and numbers. But I think, as I mentioned, we would have a drastic reduction in the interest costs the company is incurring at this point in time.
And I wish you all the best. I think we have been an investor with your company for really, really tough years now, been with you through the tough times, so hoping for the good times to come soon.
Absolutely, absolutely.
[Operator Instructions] The next question is from the line of [ Santosh Kumar ], individual investor.
Sir, I have a industry-related question. Basically I just wanted to understand recently, Gujarat has allocated some 40,000 acres of land to various entities, including SECI, NTPC, Adani and also some OEMs. So how does this is going to help? And whether this will be -- this land would be available for future auctions or how is that?
Look, so these are -- this is a larger area [ and of course, Pavli is there as well ], where the government has allocated 40,000, 50,000 acres of sectors of land where they want to set up about 10 to 15 gigawatts of wind in the coming few years and has been allocated to various PSUs, SECI, NTPC as well as a few private sector players. Now those who want to develop a larger wind park, will do that. But I mean, it's a good move because it's opened up a much larger area with clear visibility where transmission lines can be built over the next couple of years. Because eventually, as larger turbines come in and if the industry needs to start putting up much larger volumes, I mean we don't plan that in our picture, right? The government wants to put up 10 gigawatts of wind a year, even a 3 to 4 gigawatt installation yearly, which is where I think we should comfortably hit next year, is something which takes care of a lot of the industry-related issues. Having said that, I think these are proactive steps, which some states are taking. In fact, even Rajasthan is coming up with a large wind park going forward around Jaisalmer where they already have a land allocation policy. So these are things which are good, which are stabilizing the sectors and will enable people to take longer-term decisions in terms of commitments towards -- turbine's commitment towards building infrastructure and transmission lines.
So basically in this, SECI was allocated some land, some 10,000, 15,000 crores. So whether SECI would be offering this land in the future auction so that the OEMs or the IBPs (sic) [ IPPs ] need not procure land, and they can just go and install the turbines.
That's the plan. So just like you had certain states build solar parks where SECI comes in and conducts auctions. And the winners of those solar parks are given ready-made land and ready-made evacuation infrastructure. That's the plan for the wind energy business also for some of these larger wind parks where people like SECI will keep the land ready and develop the evacuation facilities. And then bidders under auctions will be winning those tenders and by getting a plug-and-play infrastructure to build wind farms.
Okay. Sir, my next question is with respect to the SECI-4 auction. I think tariff was really low. It was below INR 2.5. So in that case, 2 IIPs have said that they will not be executing these orders because of low tariff and also because of COVID situation, which has increased the cost of building these plants. So was that issue rectified [Foreign Language] resolved? Or it just opened with SECI and I...
Sorry, I didn't understand. What's your question?
Sir, in SECI-4 auction, the tariff was really low. It was below INR 2.5.
It was INR 2.5.
Yes, INR 2.44.
That was SECI-3. INR 2.51 was SECI-4. But yes, more or less the same, all of them.
Yes. So some of the IIPs said that because it was a very low tariff and also because of COVID situation, the cost of plants have increased, and they cannot execute these orders. So there was some -- they said that they went back to SECI, and they asked for cancellation of these orders and PPAs. So after that, was there any resolution on this? Or they are still open...
They're not kidding on that. That's something with the private parties, various parties need to deal with. We are aware of the orders, which we won and which we are executing, such as the Continuum order as well as our orders and so on and so forth. That's something, which different parties have taken a call on. I think a lot of them also face the issue that they're no longer getting supplies because with these unrealistic prices, assuming OEMs will continue to seize turbines below cost. As you are well aware, most of the OEMs have shut down. All the inventories are now allocated. So naturally, no OEM is going to make a turbine before the cost -- sell a turbine below the cost of production. So I think it's -- if you ask my honest opinion, I think it was the fault of IPPs, and I think they should bear the consequences, which may be encashment of BGs or whatever it will.
Okay. So my third question is with respect to SECI auctions again, sir. In last SECI 9 auctions, there was an underbidding, against 2,000 megawatts, only some 970 megawatts was allocated, mainly because of underbidding. So -- and since then, SECI has been postponing a lot of auctions related to the hybrid and also wind auctions. So what is your take on that, sir, basically, interest is not there in the market to bid for new PPS? Or what is it exactly?
So, I think there were a lot of regulatory issues, which had to be sorted out, which was with respect to extensions of SECI-3, 4 and so on, with respect to land allocation policies in Gujarat and so on and so forth. And a lot of the people who had required extension for 3, 4 and other projects, under COVID, a lot of that clarity came in. So I think going forward, definitely, I believe there should be a higher bidding. More so, given at realistic tariff levels, people will be able to make a realistic return because when tariff levels are absurdly low, no bank wants to finance them and people did not want to bid. Thanks to MNRE, finally removing the cap in wind auctions, I think there should be a significant interest coming back, number one. Number two, with respect to other auctions, they have already so much more than 10 to 12 gigawatts of wind, which needs to be executed on the ground across various SECI-3, 4, 5, 6, 7, 8 and now 9, there's a huge runway of wind projects, which needs to be done. So if you just keep bidding for the sake of bidding, people still need to execute the SECI-3, 4, 5 and 6. So effectively, you can't move towards so much large volumes when you're already there. And I think second, there's already a 5-gigawatt bid, which is around the clock hybrid bid, which has been announced. I think in the next coming week is when people need to build -- submit their tenders. So I think there's a fairly large pipeline already, which exists as well as a large pipeline, which is coming up in the market.
Actually, that -- the 5,000-megawatt bid is also again -- it was postponed to December. So that is there, as well as like...
Yes, but that something that [ is going to come up ]. Whether it gets postponed from December to 15 Jan or to 31 Jan, I cannot answer that. I think, as I did mention, there's almost 12 gigawatt of wind, which still needs to be executed. There's a shortage of turbine manufacturer, there's a shortage of supplies in the market. So I mean, I wouldn't be too worried about this.
And my fourth question is with respect to OEMs. How like -- because industry structure has improved. So a lot of foreign OEMS, including GE, Vestas are showing interest in Indian market. So how are we placed as compared to these larger OEMs? They have a different technology.
Yes. Sorry, can you repeat your question? And if you could just be a little quicker because I -- the voice was a little [ jumping ]. I missed your question.
Yes, yes. Sorry, sir. Basically, because wind market has improved in India, now the bigger OEMS, bigger foreign OEMs like GE and Vestas are showing interest in India. So they have a better technology compared to maybe Indian companies. So how are we placed compared to bigger OEMs?
No, I would just like to remind that we were the first OEM to bring in the DFID 2-megawatt technology in India. And I think we are probably going to be the fastest or the first to actually commercially start deploying the 3.3-megawatt turbine in India. So I think we're well on track to compete with these guys. Let's not forget, these guys have been around in India for the past 10 to 15 years. At different points in time, they decide to love India or hate India, if I may say so. But having said that, I think we are well poised on the technology front with our 3.3-megawatt platform. And I think we are way more competitive than any other player in the Indian market.
Thank you. That was the last question of the conference. I now hand the conference over to the management for closing comments. Mr. Jain, we are not able to hear you.
Sorry, I lost you.
Sir, if you may continue before the closing comments.
Thank you. Thank you, everybody. Thank you for your time and interest in the company. I would like to wish you all a very happy and prosperous Diwali in the months to come -- in the days to come. And would hope that all of you remain safe and your families remain safe. We are extremely enthused with the wind sector back. We are ramping up production. We are ramping up execution on the ground. We have a lot more orders. We've taken a lot of actions on the balance sheet front. And hopefully, in the coming quarter and thereafter, we should be -- we should gradually get back to our historical strength. Thank you and look forward to talking to you all.
Thank you very much, sir.